Banks Look to Forestall Foreclosures

Six major banks and the Bush administration on Tuesday said they had agreed to a new plan to pause the foreclosure process for the most delinquent of mortgages in an effort to keep homeowners in their houses.

Through "Project Lifeline," Bank of America(BAC Quote), Citigroup(C Quote), Countrywide Financial(CFC Quote), JPMorgan Chase(JPM Quote), Wells Fargo(WFC Quote) and Washington Mutual(WM Quote) said they would reach out to homeowners more than 90 days delinquent on their mortgages to work out solutions.

"This is an important new initiative, targeted to reach not only subprime borrowers, but all 90-day delinquent homeowners nationwide with a step-by-step approach to find individual solutions to individual problems," Treasury Secretary Henry Paulson said in a press conference that also featured Housing and Urban Development Secretary Alphonso Jackson and BofA Consumer Real Estate and Insurance Services Group President Floyd Robinson. "We encourage all HOPE NOW servicers to adopt this new program."

HOPE NOW is an alliance of mortgage lenders, government officials, nonprofits and other groups launched last fall, aimed at minimizing the impact of the housing downturn through a private sector-led effort. The six banks involved in Project Lifeline together represent 50% of the mortgage market, Paulson said.

Project Lifeline is intended to complement an earlier plan worked out amid mortgage lenders, government officials and the American Securitization Forum to aid subprime borrowers who stayed current on their initial teaser mortgage rates, but have struggled to keep up with payments as the rates went up. Under the plan, some borrowers could see their teaser rates frozen for up to five years and could be fast-tracked to refinance their loans.

"None of these efforts are a silver bullet that will undo the excesses of the past years, nor are they designed to bail out real estate speculators or those who committed fraud during the mortgage process," Paulson said. "These efforts are to help American families who both want to and can, through a loan modification or refinancing, stay in their homes."

Stocks of all six banks were rising modestly after the announcement.